Updated over 8 years ago on . Most recent reply
Buy for Cash flow only ?!?!?
I have what I think is a pretty decent opportunity for a rental property, but I need some advice!
Using the 50% rule it will cash flow about $400/month.......HOWEVER, the purchase price is ~$260k and the ARV at best is $310k (I will have to put about $60k in for repairs, holding costs, etc.). The yearly Cash on Cash return is about 8% (slightly low due to 25% down payment).
All that said do I buy for the solid cash flow??? Or keep looking for a better deal. Also good to note it is in a decent rental market and all my numbers are on the conservative side.
- Jonathan Klemm
- [email protected]
Most Popular Reply
#5 All Forums Contributor
- Plymouth, MI
Not sure how you're calculating your CoCR. Assuming you're paying cash for the repairs, etc... ($60k), I just did my CoCR calculation and I'm getting 3.84%...which is terrible. You don't buy Rentals just for Cash Flow. You have to buy them with the idea that you also must get your cash you put in back to you and into the next deal ASAP. At 3.84%, that means if all goes well, you won't break even for more than 25 years.
Why are you putting 25% down? If it's to get a higher cash flow per month, it's an illusion. All you're doing is paying for all the negative cash flow up front.